Sunday, December 03, 2006

Sunday Evening Post

Good reading for a Sunday night. Here are some items you might enjoy.

From December 1 Financial Times article on Oakland A's GM Billy Beane, the number-crunching baseball manager who served as the focus of Michael Lewis' book, Moneyball.

Billy Beane is an unlikely speaker at an investment conference. The general manager of baseball’s Oakland Athletics looks, and speaks, like the professional athlete he once was – he is 6ft 4in tall, is still in excellent physical shape, boasts a healthy tan and speaks in relaxed tones.

But at T. Rowe Price’s annual investment symposium in Baltimore last month, he took top billing over an array of investment analysts and historians, and kept his audience – mostly of fund managers and their clients – rapt with attention.

Beane’s great contribution to baseball – he is quick to admit – has been to apply to it techniques that were first honed by investors on Wall Street. Now, to his evident enjoyment, Wall Street is interested by the lessons it can learn from the world of professional sports. Beane’s decisions on hiring players – and those of an increasing number of his competitors – are based on quantitative evaluation techniques, aimed at finding market mispricing. He freely admits that he has borrowed liberally from the techniques of value investing and arbitrage. To the extent that they work, people such as the fund managers at T.Rowe Price want to know about them.

We are still seeing a constant stream of news on the still-hot global art market. The weekend editions of both the Wall St. Journal and the Financial Times carried items devoted to the subject.

WSJ even included a "special advertising section" pullout devoted to new buyers; a cursory glance revealed article-styled content alongside of ads for art advisory services. FT's weekend edition came with a pullout section on "Collecting" that included articles on Phillips de Pury and the continuing strength at the high end of the contemporary art market.

But to me, the most interesting item was an article by Tom Mitchell entitled, "Asian art boom mirrored elsewhere as global rich get richer".

This is a great piece, one that captures the larger significance of the recent global art boom.

In a region where a Chinese bank looking to raise $22bn can attract half a trillion dollars in initial public offering of shares orders, $19.4m (£9.8m) does not seem that much for a piece of porcelain.

The price paid for an 18th century imperial Chinese "swallows" bowl at the Hong Kong auctions of Christie's this week - a world record for a Qing dynasty ceramic - is a reminder that Industrial and Commercial Bank of China's mega-IPO in October was just one facet of an investment craze sweeping Asia. "What's happening to us is symptomatic of what's happening to the world," says Edward Dolman, Christie's chief executive. "It's being driven by the extraordinary amounts of cash that are around. It's a great time to be selling art."

In other words, it is now apparent to some that money is cheap and easily created out of thin air. We have reached the point where many among the rich are willing to trade in piles of their paper money to secure ownership of real (and rare), tangible goods.

Case in point. I recently heard someone make the following argument: what's $80 million when you talk about owning a Pollack?

Also, loved the fact that Marc Faber's recent line about investment bank bonuses was used to illustrate the point that liquidity flows are being channeled into a very select group of pockets.

As newly rich members of the financial industry compete with newly minted moguls from across the globe for the best in artworks, real estate and other tangibles, prices at the high end will continue to rise.

Do check out the piece, if you haven't already.